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14 www. bus- ex. com January 10 While many businesses have a firm grasp on their overall planning process and have a clear direction for the long term, few companies are adequately prepared for the short- term contingencies that can devastate even the most robust supply chain organisation. Continuous supply chain design is a new concept that is emerging to help companies succeed in the face of the unexpected- creating an ongoing, flexible capability to design the supply chain around both long- term goals and short- term realities. Just as every business has a unique supply chain, every company will have a specific set of ' what- if' contingencies that have the potential to disrupt operations. But some threats are universal, including: . Natural disasters, which have the ability to physically devastate any part of the supply and distribution network. . Product recalls, which can destroy consumer confidence and slash demand not only for the affected manufacturer, but for every manufacturer and retailer in the category. . Transport roadblocks, such as the 2002 West Coast port closures that brought thousands of US businesses to a standstill. . Customer bankruptcies, such as the recent Circuit City closure that dramatically affected many consumer electronics manufacturers. . Terrorist attacks and political unrest, which can impact both supply and distribution facilities, as well as national transport systems. . Dramatic changes in currency exchange rates, which can mean the difference between profit and loss. Even a development that seems positive, such as a wildly successful new product introduction, has the potential to turn the supply chain upside down if an organisation has not prepared for it. Is it really possible to prepare for these kinds of contingencies- and ensure that the supply chain maintains a high level of performance? Thanks to increasingly sophisticated technologies and associated processes, the answer is an unqualified ' yes'. A truly catastrophic event will certainly bring short- term disruptions, even for well- prepared companies. But, as demonstrated by some supply chain leaders, effective up- front planning can minimise these disruptions and quickly bring the entire organisation back on track. The first step is one that your business has most likely undertaken already: preparing a well- detailed supply chain plan that defines your organisation's future direction. Assuming all goes as expected, what will your supply chain look like in two, three or five years? Your supply chain design should define the future scope of your facilities and the shape of your distribution network, as well as include detailed plans focused on sourcing, inventory, new products and staffing levels. Of course, this supply chain design will be based on your organisation's projections about overall and regional demand levels, growth projections for specific customers and the likely actions of your primary competitors. As the earth has flattened and both offshore sourcing and international customers have become more prevalent, the supply chain design process has become much more complex. Are you allowing enough lead time to ship products from around the world? Is product inventory optimised to match demand and distribution in every local market? With so many suppliers and customers to consider- often spread across the globe- designing a supply chain plan to support your organisation's long- term vision under a best- case scenario can be a daunting task. Even more intimidating for most companies is looking past the best- case scenario- and designing a flexible, responsive supply chain that can weather any number of contingencies. With so many possible threats, ranging from random storms to carefully planned acts of terrorism, how can the typical company expect to consider, and plan for, every possible disaster? The answer lies in a company's basic philosophy of supply chain design. Instead of viewing design as a one- time event, or an annual planning exercise, today's planning leaders are taking a continuous approach to supply chain design. In a volatile business world, it is becoming imperative to design- and redesign- the supply chain on an ongoing basis to reflect both the newest dangers and the emerging opportunities. Companies should use their long- term supply chain plan as a starting point, then begin to ask themselves what they would do if various contingencies were to occur. They need to consider the impact of a number of threats on various critical components of the supply chain, including: . Sourcing plans, which can be thrown off by extreme weather, political unrest and other events that take place across the global supply chain. Even changes in currency rates can suddenly make an entire group of suppliers unprofitable. In today's fast- changing world, companies need to take an ongoing look at their network of suppliers, modelling the effects of any disruptions on the overall sourcing plan. . Inventory levels, which need to be continuously optimised against long- term business objectives, changing market conditions and supply constraints- as

Supply chain management January 10 www. bus- ex. com 15 allow an ongoing assessment of raw materials sources, factories and factory processes, distribution centres, seasonal demand variations, transport links, outsourcing, inventory and related costs and constraints. Innovative technology solutions can serve as a central repository of data about the current and potential performance of the supply chain. Organisations can create dynamic supply chain models that allow them to consider a wide range of variables and contingencies, as well as create strategic responses to these what- if scenarios. From the terrorist attacks of September 11, 2001, to the catastrophic devastation caused by hurricane Katrina, recent events have changed the face of the modern business world, impacting every facet of our organisations. While many of us view our international supply chains as strong and robust, in reality they are fragile and easily disrupted when the unexpected occurs. There is no longer a question that companies have to prepare for contingencies within their businesses; today's volatile world has made such preparation an absolute necessity. The only question that remains is, ' Can we do it?' With the advent of sophisticated modelling and simulation tools, and the innovative processes that support them, every business can embrace continuous supply chain design with a high degree of confidence- and face its worst- case fears head on. - Hal Feuchtwanger is managing director, Global Logistics for i2: www. i2. com well as emergencies like customer bankruptcies. In the event of such contingencies, businesses will need to define which inventories to carry, where, in what form and how much across the entire procurement, manufacturing and distribution network. . The transport network, which may need to be reconfigured due to port closures, natural disasters or even rapidly escalating fuel costs. When the optimal transport plan becomes impossible, businesses can consider the use of cross- docks, compare the advantages of various transport modes and assess flexible strategies such as merge- in-transit, co- mingling and multi- drop direct shipments. Of course, as the typical supply chain becomes broader and more global, the complexity of the continuous design process will only increase. With suppliers and customers spanning the world, there is a long list of contingencies that may disrupt the supply chain; and the effects of each one must be considered and prepared for. Fortunately, the supply chain management industry has responded to this high degree of complexity with a new generation of technologies and associated processes that support continuous supply chain planning. Today, it is easier than ever for businesses to make intelligent decisions at every stage of the supply chain, from raw materials procurement to finished goods distribution- and then re- examine these decisions as the business situation changes. Powerful new modelling tools provide a dynamic look across the entire supply chain and